EXHIBIT 10.2
================================================================================
PURCHASE AGREEMENT
among
MEADOWBROOK INSURANCE GROUP, INC.,
MEADOWBROOK CAPITAL TRUST I
and
DEKANIA CDO I, LTD.
----------------
Dated as of September 30, 2003
----------------
================================================================================
PURCHASE AGREEMENT
($10,000,000 Trust Preferred Securities)
THIS PURCHASE AGREEMENT, dated as of September 30, 2003 (this "Purchase
Agreement"), is entered into among Meadowbrook Insurance Group, Inc., a Michigan
corporation (the "Company"), and Meadowbrook Capital Trust I, a Delaware
statutory trust (the "Trust", and together with the Company, the "Sellers"), and
Dekania CDO I, Ltd. or its assignee. (the "Purchaser").
WITNESSETH:
WHEREAS, the Sellers propose to issue and sell 10,000 Floating Rate
Preferred Securities of the Trust, having a stated liquidation amount of $1,000
per security, bearing a variable rate, reset quarterly, equal to LIBOR (as
defined in the Indenture (as defined below)) plus 4.05% (the "Preferred
Securities");
WHEREAS, the Preferred Securities will be guaranteed by the Company
(the "Guarantee") pursuant to the Guarantee Agreement (the "Guarantee
Agreement"), dated as of the Closing Date (defined below), and executed and
delivered by the Company and JPMorgan Chase Bank, a New York banking
corporation, as trustee (in such capacity, the "Guarantee Trustee"), for the
benefit of the holders from time to time of the Preferred Securities;
WHEREAS, the entire proceeds from the sale of the Preferred Securities
will be combined with the entire proceeds from the sale by the Trust to the
Company of its common securities (the "Common Securities"), and will be used by
the Trust to purchase Ten Million Three Hundred Ten Thousand Dollars
($10,310,000) in principal amount of the unsecured junior subordinated
deferrable interest notes of the Company (the "Junior Subordinated Notes");
WHEREAS, the Preferred Securities and the Common Securities for the
Trust will be issued pursuant to the Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of the Closing Date, among the Company, as
depositor, JPMorgan Chase Bank, a New York banking corporation, as property
trustee (in such capacity, the "Property Trustee"), Chase Manhattan Bank USA,
National Association, a national banking association, as Delaware trustee (in
such capacity, the "Delaware Trustee"), the Administrative Trustees named
therein (in such capacities, the "Administrative Trustees") and the holders from
time to time of undivided beneficial interests in the assets of the Trust; and
WHEREAS, the Junior Subordinated Notes will be issued pursuant to a
Junior Subordinated Indenture, dated as of the Closing Date (the "Indenture"),
between the Company and JPMorgan Chase Bank, a New York banking corporation, as
indenture trustee (in such capacity, the "Indenture Trustee").
NOW, THEREFORE, in consideration of the mutual agreements and subject
to the terms and conditions herein set forth, the parties hereto agree as
follows:
1. DEFINITIONS. The Preferred Securities, the Common
Securities and the Junior Subordinated Notes are collectively referred to herein
as the "Securities." This Purchase Agreement, the Indenture, the Trust
Agreement, the Guarantee Agreement and the Securities are collectively referred
to herein as the "Operative Documents." All other capitalized terms used but not
defined in this Purchase Agreement shall have the respective meanings ascribed
thereto in the Indenture.
2. PURCHASE AND SALE OF THE PREFERRED SECURITIES.
(a) The Sellers agree to sell to the Purchaser, and the
Purchaser agrees to purchase from the Sellers the Preferred Securities for an
amount (the "Purchase Price") equal to Ten Million Dollars ($10,000,000). The
Purchaser shall be responsible for the rating agency costs and expenses. The
Sellers shall use the Purchase Price, together with the proceeds from the sale
of the Common Securities, to purchase the Junior Subordinated Notes.
(b) Delivery or transfer of, and payment for, the
Preferred Securities shall be made at 10:00 A.M. Chicago time (11:00 A.M. New
York time), on September 30, 2003 or such later date (not later than October 30,
2003 (30 days later)) as the parties may designate (such date and time of
delivery and payment for the Preferred Securities being herein called the
"Closing Date"). The Preferred Securities shall be transferred and delivered to
the Purchaser against the payment of the Purchase Price to the Sellers made by
wire transfer in immediately available funds on the Closing Date to a U.S.
account designated in writing by the Company at least two business days prior to
the Closing Date.
(c) Delivery of the Preferred Securities shall be made at
such location, and in such names and denominations, as the Purchaser shall
designate at least two business days in advance of the Closing Date. The Company
and the Trust agree to have the Preferred Securities available for inspection
and checking by the Purchaser in Chicago, Illinois, not later than 1:00 P.M.,
Chicago time (2:00 P.M. New York time), on the business day prior to the Closing
Date. The closing for the purchase and sale of the Preferred Securities shall
occur at the offices of Mayer, Brown, Xxxx & Maw LLP, 000 Xxxxx XxXxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, or such other place as the parties hereto shall agree.
3. CONDITIONS. The obligations of the parties under this
Purchase Agreement are subject to the following conditions:
(a) the representations and warranties contained herein
shall be accurate as of the date of delivery of the Preferred Securities.
(b) the Purchaser shall have sold securities issued by it
in such an amount that the net proceeds therefrom shall be available on the
Closing Date and shall be sufficient to purchase the Preferred Securities and
all other preferred securities contemplated in agreements similar to this
Agreement.
3
(c) Xxxxxxx X. Xxxxxxxx, Senior Vice President, General
Counsel and Secretary for the Company (the "Company Counsel") shall have
delivered an opinion, dated the Closing Date, addressed to the Purchaser and
JPMorgan Chase Bank, in substantially the form set out in Annex A-I hereto and
the Company shall have furnished to the Purchaser the opinion of the Company's
General Counsel or a certificate signed by the Company's Chief Executive
Officer, President or an Executive Vice President and its Chief Financial
Officer, Treasurer or Assistant Treasurer, dated the Closing Date, addressed to
the Purchaser, in substantially the form set out in Annex A-II hereto. In
rendering their opinion, the Company Counsel may rely as to factual matters upon
certificates or other documents furnished by officers, directors and trustees of
the Company and the Trust and by government officials (provided, however, that
copies of any such certificates or documents are delivered to the Purchaser) and
by and upon such other documents as such counsel may, in their reasonable
opinion, deem appropriate as a basis for the Company Counsel's opinion. The
Company Counsel may specify the jurisdictions in which they are admitted to
practice and that they are not admitted to practice in any other jurisdiction
and are not experts in the law of any other jurisdiction. If the Company Counsel
is not admitted to practice in the State of New York, the opinion of the Company
Counsel may assume, for purposes of the opinion, that the laws of the State of
New York are substantively identical, in all respects material to the opinion,
to the internal laws of the state in which such counsel is admitted to practice.
Such Company Counsel Opinion shall not state that they are to be governed or
qualified by, or that they are otherwise subject to, any treatise, written
policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
(d) The Purchaser shall have been furnished the opinion
of Mayer, Brown, Xxxx & Maw LLP, special tax counsel for the Purchaser, dated
the Closing Date, addressed to the Purchaser and JPMorgan Chase Bank, in
substantially the form set out in Annex B hereto.
(e) The Purchaser shall have received the opinion of
Xxxxxxxx, Xxxxxx & Finger, P.A., special Delaware counsel for the Purchaser and
the Delaware Trustee, dated the Closing Date, addressed to the Purchaser,
JPMorgan Chase Bank, the Delaware Trustee and the Company, in substantially the
form set out in Annex C hereto.
(f) The Purchaser shall have received the opinion of
Xxxxx Xxxxxxx & Xxxx LLP, special counsel for the Guarantee Trustee, the
Property Trustee and the Indenture Trustee, dated the Closing Date, addressed to
the Purchaser, in substantially the form set out in Annex D hereto.
(g) The Purchaser shall have received the opinion of
Xxxxxxxx, Xxxxxx & Finger, P.A., special Delaware counsel for the Delaware
Trustee, dated the Closing Date, addressed to the Purchaser and JPMorgan Chase
Bank, in substantially the form set out in Annex E hereto.
(h) The Company shall have furnished to the Purchaser a
certificate of the Company, signed by the Chief Executive Officer, President or
an Executive Vice President and by the Chief Financial Officer, Treasurer or
Assistant Treasurer of the Company, and the Trust shall have furnished to the
Purchaser a certificate of the Trust, signed by an Administrative
4
Trustee of the Trust, in each case dated the Closing Date, and, in the case of
the Company, as to (i) and (ii) below and, in the case of the Trust, as to (i)
below.
(i) the representations and warranties in this
Purchase Agreement are true and correct on and as of the
Closing Date with the same effect as if made on the Closing
Date, and the Company and the Trust have complied with all the
agreements and satisfied all the conditions on either of their
part to be performed or satisfied at or prior to the Closing
Date; and
(ii) since the date of the Interim Financial
Statements (as defined below), there has been no material
adverse change in the condition (financial or other),
earnings, business or assets of the Company and its
subsidiaries, whether or not arising from transactions
occurring in the ordinary course of business.
(i) Subsequent to the execution of this Purchase
Agreement, there shall not have been any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
earnings, business or assets of the Company and its subsidiaries, whether or not
occurring in the ordinary course of business, the effect of which is, in the
Purchaser's judgment, so material and adverse as to make it impractical or
inadvisable to proceed with the purchase of the Preferred Securities.
(j) Prior to the Closing Date, the Company and the Trust
shall have furnished to the Purchaser and its counsel such further information,
certificates and documents as the Purchaser or its counsel may reasonably
request.
If any of the conditions specified in this Section 3 shall not have
been fulfilled when and as provided in this Purchase Agreement, or if any of the
opinions, certificates and documents mentioned above or elsewhere in this
Purchase Agreement shall not be reasonably satisfactory in form and substance to
the Purchaser or its counsel, this Purchase Agreement and all the Purchaser's
obligations hereunder may be canceled at, or at any time prior to, the Closing
Date by the Purchaser. Notice of such cancellation shall be given to the Company
and the Trust in writing or by telephone or facsimile confirmed in writing.
Each certificate signed by any trustee of the Trust or any officer of
the Company and delivered to the Purchaser or the Purchaser's counsel in
connection with the Operative Documents and the transactions contemplated hereby
and thereby shall be deemed to be a representation and warranty of the Trust
and/or the Company, as the case may be, and not by such trustee or officer in
any individual capacity.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
TRUST. The Company and the Trust jointly and severally represent and warrant to,
and agree with the Purchaser, as follows:
(a) Neither the Company nor the Trust, nor any of their
"Affiliates" (as defined in Rule 501(b) of Regulation D ("Regulation D") under
the Securities Act (as defined below)), nor any person acting on its or their
behalf, has, directly or indirectly, made offers or sales of any security, or
solicited offers to buy any security, under circumstances that would
5
require the registration of any of the Securities under the Securities Act of
1933, as amended (the "Securities Act").
(b) Neither the Company nor the Trust, nor any of their
Affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of any of the Securities.
(c) The Securities (i) are not and have not been listed
on a national securities exchange registered under section 6 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or quoted on a U.S.
automated inter-dealer quotation system and (ii) are not of an open-end
investment company, unit investment trust or face-amount certificate company
that are, or are required to be, registered under section 8 of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and the
Securities otherwise satisfy the eligibility requirements of Rule 144A(d)(3)
promulgated pursuant to the Securities Act ("Rule 144A(d)(3)").
(d) Neither the Company nor the Trust, nor any of their
Affiliates, nor any person acting on its or their behalf, has engaged, or will
engage, in any "directed selling efforts" within the meaning of Regulation S
under the Securities Act with respect to the Securities.
(e) Neither the Company nor the Trust is, and,
immediately following consummation of the transactions contemplated hereby and
the application of the net proceeds therefrom, will not be, an "investment
company" or an entity "controlled" by an "investment company," in each case
within the meaning of section 3(a) of the Investment Company Act.
(f) Neither the Company nor the Trust has paid or agreed
to pay to any person any compensation for soliciting another to purchase any of
the Securities, except for the Preferred Securities Commission and/or the sales
commission the Company has agreed to pay to Dekania Capital Management, LLC (or
to the Company's introducing agent on behalf of Dekania Capital Management LLC)
pursuant to the letter agreement between the Company and Dekania Capital
Management, LLC, dated September 19, 2003.
(g) The Trust has been duly created and is validly
existing in good standing as a statutory trust under the Delaware Statutory
Trust Act, 12 Del. C. Section 3801, et seq. (the "Statutory Trust Act") with all
requisite power and authority to own property and to conduct the business it
transacts and proposes to transact and to enter into and perform its obligations
under the Operative Documents to which it is a party. The Trust is duly
qualified to transact business as a foreign entity and is in good standing in
each jurisdiction in which such qualification is necessary, except where the
failure to so qualify or be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings, business or assets
of the Trust, whether or not occurring in the ordinary course of business. The
Trust is not a party to or otherwise bound by any agreement other than the
Operative Documents. The Trust is and will be, under current law, classified for
federal income tax purposes as a grantor trust and not as an association or
publicly traded partnership taxable as a corporation.
6
(h) The Trust Agreement has been duly authorized by the
Company and, on the Closing Date specified in Section 2(b), will have been duly
executed and delivered by the Company and the Administrative Trustees of the
Trust, and, assuming due authorization, execution and delivery by the Property
Trustee and the Delaware Trustee, will be a legal, valid and binding obligation
of the Company and the Administrative Trustees, enforceable against them in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general principles of
equity. Each of the Administrative Trustees of the Trust is an employee of the
Company or one of its subsidiary insurance companies and has been duly
authorized by the Company to execute and deliver the Trust Agreement.
(i) Each of the Guarantee Agreement and the Indenture has
been duly authorized by the Company and, on the Closing Date, will have been
duly executed and delivered by the Company, and, assuming due authorization,
execution and delivery by the Guarantee Trustee, in the case of the Guarantee
Agreement, and by the Indenture Trustee, in the case of the Indenture, will be a
legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general principles of
equity.
(j) The Preferred Securities and the Common Securities
have been duly authorized by the Trust and, when issued and delivered against
payment therefor on the Closing Date in accordance with this Purchase Agreement,
in the case of the Preferred Securities, and in accordance with the Common
Securities Subscription Agreement, in the case of the Common Securities, will be
validly issued, fully paid and non-assessable and will represent undivided
beneficial interests in the assets of the Trust entitled to the benefits of the
Trust Agreement, enforceable against the Trust in accordance with their terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity. The issuance of
the Securities is not subject to any preemptive or other similar rights. On the
Closing Date, all of the issued and outstanding Common Securities will be
directly owned by the Company free and clear of any pledge, security interest,
claim, lien or other encumbrance of any kind (each, a "Lien").
(k) The Junior Subordinated Notes have been duly
authorized by the Company and, on the Closing Date, will have been duly executed
and delivered to the Indenture Trustee for authentication in accordance with the
Indenture and, when authenticated in the manner provided for in the Indenture
and delivered to the Trust against payment therefor in accordance with the
Junior Subordinated Note Purchase Agreement, will constitute legal, valid and
binding obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general principles of equity.
(l) This Purchase Agreement has been duly authorized,
executed and delivered by the Company and the Trust.
7
(m) Neither the issue and sale of the Common Securities,
the Preferred Securities or the Junior Subordinated Notes, nor the purchase of
the Junior Subordinated Notes by the Trust, nor the execution and delivery of
and compliance with the Operative Documents by the Company or the Trust, nor the
consummation of the transactions contemplated herein or therein, (i) will
conflict with or constitute a violation or breach of the Trust Agreement or the
charter or bylaws of the Company or any subsidiary of the Company or any
applicable law, statute, rule, regulation, judgment, order, writ or decree of
any government, governmental authority, agency or instrumentality or court,
domestic or foreign, having jurisdiction over the Trust or the Company or any of
its subsidiaries or their respective properties or assets (collectively, the
"Governmental Entities"), (ii) will conflict with or constitute a violation or
breach of, or a default or Repayment Event (as defined below) under, or result
in the creation or imposition of any Lien upon any property or assets of the
Trust, the Company or any of the Company's subsidiaries pursuant to, any
contract, indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which (A) the Trust, the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or (B) to which any of the
property or assets of any of them is subject, or any judgment, order or decree
of any court, governmental authority or arbitrator, except, in the case of this
clause (ii), for such conflicts, breaches, violations, defaults, Repayment
Events (as defined below) or Liens which (X) would not, singly or in the
aggregate, adversely affect the consummation of the transactions contemplated by
the Operative Documents and (Y) would not, singly or in the aggregate, have a
material adverse effect on the condition (financial or otherwise), earnings,
business, liabilities and assets (taken as a whole) or business prospects of the
Company and its subsidiaries taken as a whole, whether or not occurring in the
ordinary course of business (a "Material Adverse Effect") or (iii) require the
consent, approval, authorization or order of any court or Governmental Entity.
As used herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Trust or the
Company or any of its subsidiaries prior to its scheduled maturity.
(n) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Michigan, with all
requisite corporate power and authority to own, lease and operate its properties
and conduct the business it transacts and proposes to transact, and is duly
qualified to transact business and is in good standing as a foreign corporation
in each jurisdiction where the nature of its activities requires such
qualification, except where the failure of the Company to be so qualified would
not, singly or in the aggregate, have a Material Adverse Effect.
(o) The Company has no subsidiaries that are material to
its business, financial condition or earnings other than those subsidiaries
listed in Schedule 1 attached hereto (collectively, the "Significant
Subsidiaries"). Each Significant Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with all requisite corporate
power and authority to own, lease and operate its properties and conduct the
business it transacts and proposes to transact. Each Significant Subsidiary is
duly qualified to transact business and is in good standing as a foreign
corporation in each jurisdiction where the nature of its activities requires
8
such qualification, except where the failure to be so qualified would not,
singly or in the aggregate, have a Material Adverse Effect.
(p) Each of the Trust, the Company and each of the
Company's subsidiaries hold all necessary approvals, authorizations, orders,
licenses, consents, registrations, qualifications, certificates and permits
(including, without limitation, insurance licenses from the insurance
departments of the various states and jurisdictions where the Company's
insurance subsidiaries write insurance business or otherwise conduct insurance
or reinsurance business, as the case may be, or as may be required by any
applicable insurance statutes of such states or other jurisdictions
(collectively, the "Insurance Licenses")) (collectively, including the Insurance
Licenses, the "Government Licenses") of and from Governmental Entities necessary
to conduct their respective businesses as now being conducted, and neither the
Trust, the Company nor any of the Company's subsidiaries has received any notice
of proceedings relating to the revocation or modification of any such Government
License, except where the failure to be so licensed or approved or the receipt
of an unfavorable decision, ruling or finding, would not, singly or in the
aggregate, have a Material Adverse Effect; all of the Governmental Licenses are
valid and in full force and effect, except where the invalidity or the failure
of such Governmental Licenses to be in full force and effect, would not, singly
or in the aggregate, have a Material Adverse Effect; and the Company and its
subsidiaries are in compliance with all applicable laws, rules, regulations,
judgments, orders, decrees and consents, except where the failure to be in
compliance would not, singly or in the aggregate, have a Material Adverse
Effect.
(q) Except as set forth on Schedule 4(q), all of the
issued and outstanding shares of capital stock of the Company and each of its
subsidiaries are validly issued, fully paid and non-assessable; all of the
issued and outstanding capital stock of each subsidiary of the Company is owned
by the Company, directly or through subsidiaries, free and clear of any Lien,
claim or equitable right; and none of the issued and outstanding capital stock
of the Company or any subsidiary was issued in violation of any preemptive or
similar rights arising by operation of law, under the charter or by-laws of such
entity or under any agreement to which the Company or any of its subsidiaries is
a party.
(r) Neither the Company nor any of its subsidiaries is
(i) in violation of its respective charter or by-laws or similar organizational
documents or (ii) in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which the
Company or any such subsidiary is a party or by which it or any of them may be
bound or to which any of the property or assets of any of them is subject,
except, in the case of clause (ii), where such violation or default would not,
singly or in the aggregate, have a Material Adverse Effect.
(s) There is no action, suit or proceeding before or by
any Governmental Entity, arbitrator or court, domestic or foreign, now pending
or, to the knowledge of the Company or the Trust after due inquiry, threatened
against or affecting the Trust or the Company or any of the Company's
subsidiaries, except for such actions, suits or proceedings that, if adversely
determined, would not, singly or in the aggregate, adversely affect the
consummation of the transactions contemplated by the Operative Documents or have
a Material Adverse Effect;
9
and the aggregate of all pending legal or governmental proceedings to which the
Trust or the Company or any of its subsidiaries is a party or of which any of
their respective properties or assets is subject, including ordinary routine
litigation incidental to the business, are not expected to result in a Material
Adverse Effect.
(t) The accountants of the Company who certified the
Financial Statements (as defined below) are independent public accountants of
the Company and its subsidiaries within the meaning of the Securities Act, and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder.
(u) The audited consolidated financial statements
(including the notes thereto) and schedules of the Company and its consolidated
subsidiaries for the fiscal year ended December 31, 2002 (the "Financial
Statements") and the interim unaudited consolidated financial statements of the
Company and its consolidated subsidiaries for the quarter ended June 30, 2003
(the "Interim Financial Statements") provided to the Purchaser are the most
recent available audited and unaudited consolidated financial statements of the
Company and its consolidated subsidiaries, respectively, and fairly present in
all material respects, in accordance with U.S. generally accepted accounting
principles, the financial position of the Company and its consolidated
subsidiaries, and the results of operations and changes in financial condition
as of the dates and for the periods therein specified, subject, in the case of
Interim Financial Statements, to year-end adjustments (which are expected to
consist solely of normal recurring adjustments). Such consolidated financial
statements and schedules have been prepared in accordance with U.S. generally
accepted accounting principles ("GAAP") consistently applied throughout the
periods involved (except as otherwise noted therein).
(v) The statutory financial statements dated as of June
30, 2003 and for the year ended December 31, 2002 (the "Statutory Financial
Statements") of each of the Company's insurance company subsidiaries have, for
each relevant period, been prepared in accordance with statutory accounting
principles ("SAP") prescribed or permitted by the National Association of
Insurance Commissioners, and with respect to each insurance company subsidiary,
each the appropriate insurance department of the state of domicile of such
insurance company subsidiary, and such accounting practices have been applied on
a consistent basis throughout the periods involved (whether GAAP or SAP, as
applicable, the "Applicable Accounting Principles").
(w) None of the Trust, the Company nor any of its
subsidiaries has any material liability, whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its subsidiaries that could give rise to any such liability),
except for (i) liabilities set forth in the Financial Statements or the Interim
Financial Statements and (ii) normal fluctuations in the amount of the
liabilities referred to in clause (i) above occurring in the ordinary course of
business of the Trust, the Company and all of its subsidiaries since the date of
the most recent balance sheet included in such Financial Statements.
10
(x) The Company's report on the Statement of Actuarial
Opinion Annual Statement for Star Insurance Company For the Year Ended December
31, 2002, dated February 27, 2003, the Statement of Actuarial Opinion Annual
Statement of Ameritrust Insurance Corporation For the Year Ended December 31,
2002, the Statement of Actuarial Opinion Annual Statement of Williamsburg
National Insurance Corporation For the Year Ended December 31, 2002, dated
February 27, 2003, and the Statement of Actuarial Opinion Annual Statement of
Savers Property & Casualty Insurance Company For the Year Ended December 31,
dated February 26, 2003 (the "Regulatory Reports"), provided to the Purchaser is
the most recently available such report, and the information therein fairly
presents in all material respects the financial position of the Company and its
subsidiaries. None of the Company or any of its subsidiaries has been requested
by a Governmental Entity to republish, restate, or refile any regulatory or
financial report.
(y) Since the respective dates of the Financial
Statements, Interim Financial Statements, Statutory Financial Statements and the
Regulatory Reports, there has not been (A) any material adverse change or
development with respect to the condition (financial or otherwise), earnings,
business, assets or business prospects of the Company and its subsidiaries,
taken as a whole, whether or not occurring in the ordinary course of business or
(B) any dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock other than regular quarterly dividends
on the Company's common stock.
(z) The authorized capitalization of the Company and its
subsidiary insurance companies are as set forth in the Financial Statements, the
Interim Financial Statements, the Statutory Financial Statements and Regulatory
Reports and meet all applicable regulatory requirements with respect thereto.
(aa) The documents of the Company filed with the
Commission in accordance with the Exchange Act, from and including the
commencement of the fiscal year covered by the Company's most recent Annual
Report on Form 10-K, at the time they were or hereafter are filed by the Company
with the Commission (collectively, the "1934 Act Reports"), complied and will
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission thereunder (the "1934 Act
Regulations"), and, at the date of this Purchase Agreement and on the Closing
Date, do not and will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and other than such instruments, agreements, contracts and
other documents as are filed as exhibits to the Company's Annual Report on Form
10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, there are
no instruments, agreements, contracts or documents of a character described in
Item 601 of Regulation S-K promulgated by the Commission to which the Company or
any of its subsidiaries is a party. The Company is in compliance with all
currently applicable requirements of the Exchange Act that were added by the
Xxxxxxxx-Xxxxx Act of 2002.
(bb) Except as set forth on Schedule 4(bb), none of the
Trust, the Company nor any of its subsidiaries, or any of their respective
officers, directors, employees or representatives, is subject or is party to, or
has received any notice from any Regulatory Agency (as defined
11
below) that any of them will become subject or party to any investigation with
respect to, any cease-and-desist order, agreement, civil monetary penalty,
consent agreement, memorandum of understanding or other regulatory enforcement
action, proceeding or order with or by, or is a party to any commitment letter
or similar undertaking to, or is subject to any directive by, or has been a
recipient of any supervisory letter from, or has adopted any board resolutions
at the request of, any Regulatory Agency that, in any such case, currently
restricts in any material respect the conduct of their business or that in any
material manner relates to their capital adequacy, capital reserves, their
marketing or sales practices, their ability or authority to pay dividends or
make distributions to their shareholders or make payments of principal or
interest on their debt obligations, their management or their business (each, a
"Regulatory Action"), nor has the Trust, the Company or any of its subsidiaries
been advised by any Regulatory Agency that it is considering issuing or
requesting any such Regulatory Action; and there is no unresolved violation,
criticism or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of the Trust, the Company or any of its
subsidiaries, except where such unresolved violation, criticism or exception
would not, singly or in the aggregate, have a Material Adverse Effect. As used
herein, the term "Regulatory Agency" means any federal or state agency charged
with the supervision or regulation of insurance companies or holding companies
of insurance companies, or engaged in the insurance of insurance company
reserves, or any court, administrative agency or commission or other
governmental agency, authority or instrumentality having supervisory or
regulatory authority with respect to the Trust, the Company or any of its
subsidiaries.
(cc) No labor dispute with the employees of the Trust, the
Company or any of its subsidiaries exists or, to the knowledge of the executive
officers of the Trust or the Company, is imminent, except those which would not,
singly or in the aggregate, have a Material Adverse Effect.
(dd) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any Governmental
Entity, other than those that have been made or obtained, is necessary or
required for the performance by the Trust or the Company of their respective
obligations under the Operative Documents, as applicable, or the consummation by
the Trust and the Company of the transactions contemplated by the Operative
Documents.
(ee) Each of the Trust, the Company and each subsidiary of
the Company has good and marketable title to all of its respective real and
personal properties, in each case free and clear of all Liens and defects,
except for those that would not, singly or in the aggregate, have a Material
Adverse Effect; and all of the leases and subleases under which the Trust, the
Company or any subsidiary of the Company holds properties are in full force and
effect, except where the failure of such leases and subleases to be in full
force and effect would not, singly or in the aggregate, have a Material Adverse
Effect, and none of the Trust, the Company or any subsidiary of the Company has
any notice of any claim of any sort that has been asserted by anyone adverse to
the rights of the Trust, the Company or any subsidiary of the Company under any
such leases or subleases, or affecting or questioning the rights of such entity
to the continued possession of the leased or subleased premises under any such
lease or sublease, except for such claims that would not, singly or in the
aggregate, have a Material Adverse Effect.
12
(ff) The Company has no present intention to exercise its
option to defer payments of interest on the Junior Subordinated Notes as
provided in the Indenture. The Company believes that the likelihood that it
would exercise its rights to defer payments of interest on the Junior
Subordinated Notes as provided in the Indenture at any time during which the
Junior Subordinated Notes are outstanding is remote because of the restrictions
that would be imposed on the Company's ability to declare or pay dividends or
distributions on, or to redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock and on the Company's ability
to make any payments of principal, interest or premium, if any, on, or repay,
repurchase or redeem, any of its debt securities that rank pari passu in all
respects with or junior in interest to the Junior Subordinated Notes.
(gg) The information provided by the Company and the Trust
pursuant to this Purchase Agreement does not, as of the date hereof, and will
not, as of the Closing Date, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser represents and warrants to, and agrees with, the Company and the Trust
as follows:
(a) The Purchaser is aware that the Securities have not
been and will not be registered under the Securities Act and may not be offered
or sold within the United States or to "U.S. persons" (as defined in Regulation
S under the Securities Act) except in accordance with Rule 903 of Regulation S
under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act.
(b) The Purchaser is an "accredited investor," as such
term is defined in Rule 501(a) of Regulation D under the Securities Act.
(c) Neither the Purchaser, nor any of the Purchaser's
affiliates, nor any person acting on the Purchaser's or the Purchaser's
Affiliate's behalf has engaged, or will engage, in any form of "general
solicitation or general advertising" (within the meaning of Regulation D under
the Securities Act) in connection with any offer or sale of the Preferred
Securities.
6. AGREEMENTS OF THE COMPANY AND THE TRUST. The Company
and the Trust jointly and severally agree with the Purchaser as follows:
(a) During the period from the date of this Agreement to
the Closing Date, the Company and the Trust shall use their best efforts and
take all action necessary or appropriate to cause their representations and
warranties contained in Section 4 hereof to be true as of the Closing Date,
after giving effect to the transactions contemplated by this Purchase Agreement,
as if made on and as of the Closing Date.
(b) The Company and the Trust will arrange for the
qualification of the Preferred Securities for sale under the laws of such
jurisdictions as the Purchaser may designate and will maintain such
qualifications in effect so long as required for the sale of the Preferred
Securities. The Company or the Trust, as the case may be, will promptly advise
the Purchaser of
13
the receipt by the Company or the Trust, as the case may be, of any notification
with respect to the suspension of the qualification of the Preferred Securities
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose.
(c) Neither the Company nor the Trust will, nor will
either of them permit any of its Affiliates to, nor will either of them permit
any person acting on its or their behalf (other than the Purchaser) to, resell
any Preferred Securities that have been acquired by any of them.
(d) Neither the Company nor the Trust will, nor will
either of them permit any of their Affiliates or any person acting on their
behalf to, engage in any "directed selling efforts" within the meaning of
Regulation S under the Securities Act with respect to the Securities.
(e) Neither the Company nor the Trust will, nor will
either of them permit any of their Affiliates or any person acting on their
behalf to, directly or indirectly, make offers or sales of any security, or
solicit offers to buy any security, under circumstances that would require the
registration of any of the Securities under the Securities Act.
(f) Neither the Company nor the Trust will, nor will
either of them permit any of its Affiliates or any person acting on their behalf
to, engage in any form of "general solicitation or general advertising" (within
the meaning of Regulation D) in connection with any offer or sale of the any of
the Securities.
(g) So long as any of the Securities are outstanding, (i)
the Securities shall not be listed on a national securities exchange registered
under section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system and (ii) neither the Company nor the Trust shall be an open-end
investment company, unit investment trust or face-amount certificate company
that is, or is required to be, registered under section 8 of the Investment
Company Act, and, the Securities shall otherwise satisfy the eligibility
requirements of Rule 144A(d)(3).
(h) Each of the Company and the Trust shall furnish to
(i) the holders, and subsequent holders of the Preferred Securities, (ii)
Dekania Capital Management, LLC (at 0000 Xxxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, or such other address as designated by Dekania
Capital Management, LLC) and (iii) any beneficial owner of the Securities
reasonably identified to the Company and the Trust (which identification may be
made by either such beneficial owner or by Dekania Capital Management, LLC), a
duly completed and executed certificate in the form attached hereto as Annex F,
including the financial statements referenced in such Annex, which certificate
and financial statements shall be so furnished by the Company and the Trust not
later than forty five (45) days after the end of each of the first three fiscal
quarters of each fiscal year of the Company and not later than ninety (90) days
after the end of each fiscal year of the Company.
(i) Each of the Company and the Trust will, during any
period in which it is not subject to and in compliance with section 13 or 15(d)
of the Exchange Act, or it is not exempt from such reporting requirements
pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act, shall
provide to each holder of the Securities and to each prospective purchaser (as
designated by such holder) of the Securities, upon the request of such holder or
prospective purchaser, any information required to be provided by Rule
144A(d)(4) under the
14
Securities Act. If the Company and the Trust are required to register under the
Exchange Act, such reports filed in compliance with Rule 12g3-2(b) shall be
sufficient information as required above. This covenant is intended to be for
the benefit of the Purchaser, the holders of the Securities, and the prospective
purchasers designated by the Purchaser and such holders, from time to time, of
the Securities.
(j) Neither the Company nor the Trust will, until one
hundred eighty (180) days following the Closing Date, without the Purchaser's
prior written consent, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of, directly or indirectly, (i) any Preferred
Securities or other securities of the Trust other than as contemplated by this
Purchase Agreement or (ii) any other securities convertible into, or exercisable
or exchangeable for, any Preferred Securities or other securities of the Trust.
7. PAYMENT OF EXPENSES. The Company, as depositor of the
Trust, agrees to pay all costs and expenses incident to the performance of the
obligations of the Company and the Trust under this Purchase Agreement, whether
or not the transactions contemplated herein are consummated or this Purchase
Agreement is terminated, including all costs and expenses incident to (i) the
authorization, issuance, sale and delivery of the Preferred Securities and any
taxes payable in connection therewith; (ii) the fees and expenses of qualifying
the Preferred Securities under the securities laws of the several jurisdictions
as provided in Section 6(a); (iii) the fees and expenses of the counsel, the
accountants and any other experts or advisors retained by the Company or the
Trust; (iv) the fees and all reasonable expenses of the Guarantee Trustee, the
Property Trustee, the Delaware Trustee, the Indenture Trustee and any other
trustee or paying agent appointed under the Operative Documents, including the
fees and disbursements of counsel for such trustees, which fees shall not exceed
a $1,250 acceptance fee and $3,000 in administrative fees annually; (v) the fees
and all reasonable expenses of Xxxxxxxx, Xxxxxx & Finger, P.A., special Delaware
counsel retained by the Purchaser and the Delaware Trustee, which fees and
expenses shall not exceed $3500; and (vi) the fees and all reasonable expenses
of Mayer, Brown, Xxxx & Maw LLP, special counsel retained by the Purchaser,
which fees and expenses shall not exceed $30,000.
If the sale of the Preferred Securities provided for in this
Purchase Agreement is not consummated because any condition set forth in Section
3 hereof to be satisfied by either the Company or the Trust is not satisfied,
because this Purchase Agreement is terminated pursuant to Section 9 or because
of any failure, refusal or inability on the part of the Company or the Trust to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder other than by a reason of a default by the Purchaser, the
Company will reimburse the Purchaser upon demand for all reasonable
out-of-pocket expenses (including the fees and expenses of each of the
Purchaser's counsel specified in subparagraphs (v) and (vi) of the immediately
preceding paragraph) that shall have been incurred by the Purchaser in
connection with the proposed purchase and sale of the Preferred Securities. The
Company shall not in any event be liable to the Purchaser for the loss of
anticipated profits from the transactions contemplated by this Purchase
Agreement.
8. INDEMNIFICATION. (a) The Company and the Trust agree
jointly and severally to indemnify and hold harmless the Purchaser, the
Purchaser's affiliates, Dekania
15
Capital Management, LLC and Xxxxxxx Xxxxx & Co. (collectively, the "Indemnified
Parties") and the Indemnified Parties' respective directors, officers, employees
and agents and each person who "controls" the Indemnified Parties within the
meaning of either the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any information or documents
furnished or made available to the Purchaser by or on behalf of the Company,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
or (iii) the breach or alleged breach of any representation, warranty or
agreement of either Seller contained herein, and agrees to reimburse each such
Indemnified Party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in addition
to any liability which the Company or the Trust may otherwise have.
(b) The Company agrees to indemnify the Trust against all
loss, liability, claim, damage and expense whatsoever due from the Trust under
paragraph (a) above.
(c) Promptly after receipt by an Indemnified Party under
this Section 8 of notice of the commencement of any action, such Indemnified
Party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, promptly notify the indemnifying party in writing of
the commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve the indemnifying party from liability under paragraph (a)
above unless and to the extent that such failure results in the forfeiture by
the indemnifying party of material rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any Indemnified
Party other than the indemnification obligation provided in paragraph (a) above.
Purchaser shall be entitled to appoint counsel to represent the Indemnified
Party in any action for which indemnification is sought. An indemnifying party
may participate at its own expense in the defense of any such action; provided,
that counsel to the indemnifying party shall not (except with the consent of the
Indemnified Party) also be counsel to the Indemnified Party. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all Indemnified Parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. An indemnifying party will not, without
the prior written consent of the Indemnified Parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not the Indemnified Parties are actual or potential
parties to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Party from all liability arising out of such claim, action, suit or proceeding.
9. TERMINATION. This Purchase Agreement shall be subject
to termination in the absolute discretion of the Purchaser, by notice given to
the Company and the Trust prior to delivery of and payment for the Preferred
Securities, if prior to such time (i) a downgrading shall
16
have occurred in the rating accorded the Company's debt securities or preferred
stock by any "nationally recognized statistical rating organization," as that
term is used by the Commission in Rule 15c3-1(c)(2)(vi)(F) under the Exchange
Act, or such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of the
Company's debt securities or preferred stock, (ii) the Trust shall be unable to
sell and deliver to the Purchaser at least $10,000,000 stated liquidation value
of Preferred Securities, (iii) the Company or any of its subsidiaries that is an
insurance company shall cease to be "adequately-capitalized" under the statutes,
rules, regulations, codes or ordinances of any Regulatory Agency within the
meaning of any applicable regulations of any Regulatory Agency, or any formal
administrative or judicial action is taken by any appropriate state or federal
insurance regulator against the Company or of its subsidiary insurance companies
for unsafe and unsound insurance practices, or violations of law, (iv) a
suspension or material limitation in trading in securities generally shall have
occurred on the New York Stock Exchange, (v) a suspension or material limitation
in trading in any of the Company's securities shall have occurred on the
exchange or quotation system upon which the Company' securities are traded, if
any, (vi) a general moratorium on commercial insurance activities shall have
been declared either by federal or applicable state authorities or (vii) there
shall have occurred any outbreak or escalation of hostilities, or declaration by
the United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the Purchaser's
judgment, impracticable or inadvisable to proceed with the offering or delivery
of the Preferred Securities.
10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The
respective agreements, representations, warranties, indemnities and other
statements of the Company and the Trust or their respective officers or trustees
and of the Purchaser set forth in or made pursuant to this Purchase Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of the Purchaser, the Company or the Trust or any of the their
respective officers, directors, trustees or controlling persons, and will
survive delivery of and payment for the Preferred Securities. The provisions of
Sections 7 and 8 shall survive the termination or cancellation of this Purchase
Agreement.
11. AMENDMENTS. This Purchase Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement by each of the parties hereto.
12. NOTICES. All communications hereunder will be in
writing and effective only on receipt, and, if sent to the Purchaser, will be
mailed, delivered by hand or courier or sent by facsimile and confirmed to the
Purchaser c/o Dekania Capital Management, LLC, 0000 Xxxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, Attention: Xxxx Xxxxxxxxx, Facsimile: (215)
861-7700; with a copy to Mayer, Brown, Xxxx & Maw LLP, 000 Xxxxx XxXxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, Attention: J. Xxxx Xxxxxxxxx, Facsimile: (000) 000-0000
or other address as the Purchaser shall designate for such purpose in a notice
to the Company and the Trust; and if sent to the Company or the Trust, will be
mailed, delivered by hand or courier or sent by facsimile and confirmed to it at
Meadowbrook Insurance Group, Inc., 00000 Xxxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx
00000, Attention: Chief Financial Officer, Facsimile: (248) 385-
17
1100, with a copy to Xxxxxx & Xxxxxx Attorneys, P.C., The Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 000, 00000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000,
Attention: Xxxxxxx Xxxxxxx.
13. SUCCESSORS AND ASSIGNS. This Purchase Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing expressed or mentioned in
this Purchase Agreement is intended or shall be construed to give any person
other than the parties hereto and the affiliates, directors, officers,
employees, agents and controlling persons referred to in Section 8 hereof and
their successors, assigns, heirs and legal representatives, any right or
obligation hereunder. None of the rights or obligations of the Company or the
Trust under this Purchase Agreement may be assigned, whether by operation of law
or otherwise, without the Purchaser's prior written consent. The rights and
obligations of the Purchaser under this Purchase Agreement may be assigned by
the Purchaser without the Company's or the Trust's consent; provided that the
assignee assumes the obligations of the Purchaser under this Purchase Agreement.
14. APPLICABLE LAW. THIS PURCHASE AGREEMENT WILL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE
OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
15. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF
THIS PURCHASE AGREEMENT MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE
OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE
BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS PURCHASE AGREEMENT,
EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS
THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
PURCHASE AGREEMENT.
16. COUNTERPARTS AND FACSIMILE. This Purchase Agreement
may be executed by any one or more of the parties hereto in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument. This
Purchase Agreement may be executed by any one or more of the parties hereto by
facsimile.
18
IN WITNESS WHEREOF, this Purchase Agreement has been entered into as of
the date first written above.
MEADOWBROOK INSURANCE GROUP, INC.
By:
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
MEADOWBROOK CAPITAL TRUST I
By: MEADOWBROOK INSURANCE GROUP,
INC., as Depositor
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
DEKANIA CDO I, LTD.
By:
---------------------------------------
Name:
Title:
19
SCHEDULE 1
LIST OF SIGNIFICANT SUBSIDIARIES
Meadowbrook, Inc., a Michigan corporation
Star Insurance Company, a Michigan insurance company
Subsidiaries of Star Insurance Company:
Savers Property & Casualty Insurance Company, a Missouri insurance
company Ameritrust Insurance Corporation, a Florida insurance company
Williamsburg National Insurance Co., a California insurance company
20
SCHEDULE 4(Q)
Pursuant to the Restated Credit Agreement, dated September 25, 2002, between the
Company and Comerica Bank, the Company pledged the stock of Meadowbrook, Inc.
and Crest Financial Corporation. In addition, Meadowbrook, Inc. pledged the
stock of its agency subsidiaries, Meadowbrook Insurance Agency, Inc.,
Association Self Insurance Services, Inc., and Florida Preferred Administrators,
Inc. Crest Financial Corporation pledged the stock of its agency subsidiaries,
Commercial Carriers Insurance Agency, Inc., Interline Insurance Services, Inc.,
and Liberty Premium Finance, Inc.
21
SCHEDULE 4(bb)
On August 21, 2002, Star Insurance Company entered into a Stipulation Agreement
with the State of Michigan Office of Financial and Insurance Services Department
of Consumer & Industry Services (the "OFIS"). The Stipulation Agreement states
(i) Star Insurance Company's gross premium writings on a consolidated basis with
its subsidiaries shall not exceed 400% of its policyholder surplus; (ii) its
gross premium writings on a consolidated basis with its subsidiaries less
fronted premium that is ceded to commercial reinsurers with an A.M. Best rating
of B+ or higher shall not exceed 300% of the company's policyholder surplus; and
(iii) the company shall calculate its rolling 12 month results in regards to the
limitation on a quarterly basis and provide the calculations to the OFIS.
22
ANNEX A-I
Pursuant to Section 3(c)(i) of the Purchase Agreement, Xxxxxxx
X. Xxxxxxxx, Senior Vice President, General Counsel and Secretary for the
Company, shall deliver an opinion to the effect that:
(i) the Company and each Significant Subsidiary
is validly existing as a corporation in good standing under the laws of
the jurisdiction in which it is chartered or organized; each of the
Company and the Significant Subsidiaries has full corporate power and
authority to own or lease its properties and to conduct its business as
such business is currently conducted in all material respects; all
outstanding shares of capital stock of the Significant Subsidiaries
have been duly authorized and validly issued, and are fully paid and
nonassessable and owned of record and beneficially, directly or
indirectly by the Company; the Company has corporate power and
authority to (i) execute and deliver, and to perform its obligations
under, the Operative Documents to which it is a party and (iii) issue
and perform its obligations under the Notes;
(ii) neither the issue and sale of the Common
Securities, the Preferred Securities or the Junior Subordinated Notes,
nor the purchase by the Trust of the Junior Subordinated Notes, nor the
execution and delivery of and compliance with the Operative Documents
by the Company or the Trust nor the consummation of the transactions
contemplated thereby will constitute a breach or violation of the Trust
Agreement or the charter or by-laws of the Company;
(iii) the Trust Agreement has been duly
authorized, executed and delivered by the Company and duly executed and
delivered by the Administrative Trustees;
(iv) each of the Guarantee Agreement and the
Indenture has been duly authorized, executed and delivered by the
Company and, assuming it has been duly authorized, executed and
delivered by the Guarantee Trustee and the Indenture Trustee,
respectively, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity;
(v) the Junior Subordinated Notes have been duly
authorized and executed by the Company and delivered to the Indenture
Trustee for authentication in accordance with the Indenture and, when
authenticated in accordance with the provisions of the Indenture and
delivered to the Trust against payment therefor, will constitute legal,
valid and binding obligations of the Company entitled to the benefits
of the Indenture and enforceable against the Company in accordance with
their terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principles of
equity;
(vi) the Trust is not, and, following the
issuance of the Preferred Securities and the consummation of the
transactions contemplated by the Operative
A-I-1
Documents and the application of the proceeds therefrom, the Trust will
not be, an "investment company" or an entity "controlled" by an
"investment company," in each case within the meaning of Section 3(a)
of the Investment Company Act;
(vii) assuming that the Preferred Securities are
sold in a manner contemplated by, and in accordance with the Purchase
Agreement and the Trust Agreement, it is not necessary in connection
with the offer, sale and delivery of the Preferred Securities by the
Trust to the Purchaser, to register any of the Securities under the
Securities Act or to require qualification of the Indenture under the
Trust Indenture Act of 1939, as amended;
(viii) the Purchase Agreement has been duly
authorized, executed and delivered by each of the Company and the
Trust;
(ix) neither the Company nor any of its
"Affiliates" (as defined in Rule 501(b) of Regulation D under the
Securities Act ("Regulation D") has directly or indirectly, made offers
or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration of any of the
Notes, the Preferred Securities or the Common Securities being issued
pursuant to this transaction under the Securities Act, engaged in any
form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of any of the
Securities, or engaged, nor will engage, in any "directed selling
efforts" within the meaning of Regulation S under the Securities Act
with respect to the Securities;
(x) neither the Company, the Trust, nor any
Significant Subsidiaries of the Company is in breach or violation of,
or default under, with or without notice or lapse of time or both, its
articles of incorporation or charter, by-laws or other governing
documents (including without limitation, the Trust Agreement); the
execution, delivery and performance of the Operative Documents and the
consummation of the transactions contemplated by the Purchase Agreement
and the Operative Documents do not and will not (A) result in the
creation or imposition of any material lien, claim, charge, encumbrance
or restriction upon any property or assets of the Company or the
Significant Subsidiaries, or (B) conflict with, constitute a material
breach or violation of, or constitute a material default under, with or
without notice or lapse of time or both, any of the terms, provisions
or conditions of (x) the Articles of Incorporation or Charter, By-Laws
or other governing documents of the Company or its Significant
Subsidiaries, or (y) to the best of our knowledge, any material
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease, franchise, license or any other agreement or instrument to
which the Company or its Significant Subsidiaries is a party or by
which any of them or any of their respective properties may be bound or
(z) any order, decree, judgment, franchise, license, permit, rule or
regulation of any court, arbitrator, government, or governmental agency
or instrumentality, domestic or foreign, known to us having
jurisdiction over the Company or its Significant Subsidiaries or any of
their respective properties which, in the case of each of (A) or (B)
above, is material to the Company and the Significant Subsidiaries on a
consolidated basis;
A-I-2
(xi) except for filings, registrations or
qualifications that may be required by applicable securities laws, no
authorization, approval, consent or order of, or filing, registration
or qualification with, any person (including, without limitation, any
court, governmental body or authority) is required under the laws of
the State of Michigan in connection with the transactions contemplated
by the Operative Documents in connection with the offer and sale of the
Common Securities as contemplated by the Operative Documents;
(xii) (A) no action, suit or proceeding at law or
in equity is pending or threatened to which the Company, the Trust or
the Significant Subsidiaries are or may be a party, and (B) no action,
suit or proceeding is pending or threatened against or affecting the
Company, the Trust or the Significant Subsidiaries or any of their
properties, before or by any court or governmental official,
commission, board or other administrative agency, authority or body, or
any arbitrator, wherein an unfavorable decision, ruling or finding
could reasonably be expected to have a material adverse effect on the
consummation of the transactions contemplated by the Operative
Documents or the issuance and sale of the Common Securities, or the
Preferred Securities as contemplated therein or the condition
(financial or otherwise), earnings, affairs, business, or results of
operations of the Company, the Trust and the Significant Subsidiaries
on a consolidated basis; and
(xiii) assuming the truth and accuracy of the
representations and warranties of the Purchaser in the Purchase
Agreement, it is not necessary in connection with the offering, sale
and delivery of the Common Securities, the Preferred Securities, the
Junior Subordinated Notes and the Guarantee Agreement or Guarantee to
register the same under the Securities Act of 1933, as amended, under
the circumstances contemplated in the Purchase Agreement.
A-I-3
ANNEX A-II
Pursuant to Section 3(c)(ii) of the Purchase Agreement, General Counsel
for the Company shall deliver an opinion, or the Company shall provide an
Officers' Certificate, to the effect that:
(i) all of the issued and outstanding shares of
capital stock of each Significant Subsidiary are owned of record by the
Company, and the issuance of the Preferred Securities and the Common
Securities is not subject to any contractual preemptive rights known to
such [COUNSEL/OFFICER];
(ii) no consent, approval, authorization or order
of any court or governmental authority is required for the issue and
sale of the Common Securities, the Preferred Securities or the Junior
Subordinated Notes, the purchase by the Trust of the Junior
Subordinated Notes, the execution and delivery of and compliance with
the Operative Documents by the Company or the Trust or the consummation
of the transactions contemplated in the Operative Documents, except
such approvals (specified in such [OPINION/CERTIFICATE]) as have been
obtained;
(iii) to the knowledge of such [COUNSEL/OFFICER],
there is no action, suit or proceeding before or by any government,
governmental instrumentality, arbitrator or court, domestic or foreign,
now pending or threatened against or affecting the Trust or the Company
or any Significant Subsidiary that could adversely affect the
consummation of the transactions contemplated by the Operative
Documents or could have a Material Adverse Effect.
(iv) the Company is duly registered as [AN
INSURANCE HOLDING] company under the [STATE REGULATORY STATUTE] of
[STATE OF DOMICILE] and the regulations thereunder of the [STATE
REGULATORY AGENCY], and the capital reserves accounts of the Company's
insurance subsidiaries are in compliance with all applicable regulatory
authorities with jurisdiction over such entities;
(v) The execution, delivery and performance of
the Operative Documents, as applicable, by the Company and the Trust
and the consummation by the Company and the Trust of the transactions
contemplated by the Operative Documents, as applicable, (i) will not
result in any violation of the charter or bylaws of the Company, the
charter or bylaws of the Company's subsidiaries, the Trust Agreement or
the Certificate of Trust of the Trust, and (ii) will not conflict with,
or result in a breach of any of the terms or provisions of, or
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge and encumbrance upon any assets or
properties of the Company or any Significant Subsidiary under, (a) any
agreement, indenture, mortgage or instrument that the Company or any
Significant Subsidiary of the Company is a party to or by which it may
be bound or to which any of its assets or properties may be subject, or
(b) any existing applicable law, rule or administrative regulation [FOR
GENERAL COUNSEL ONLY: EXCEPT THAT I EXPRESS NO OPINION WITH RESPECT TO
THE SECURITIES LAWS OF THE STATE
A-II-1
OF DELAWARE] of any court or governmental agency or authority having
jurisdiction over the Company or any Significant Subsidiary of the
Company or any of their respective assets or properties, except in case
of (ii), where any such violation, conflict, breach, default, lien,
charge or encumbrance, would not have a material adverse effect on the
assets, properties, business, results of operations or financial
condition of the Company and its subsidiaries, taken as whole.
A-II-2
ANNEX B
Pursuant to Section 3(d) of the Purchase Agreement, Mayer,
Brown, Xxxx & Maw LLP, special tax counsel for the Purchaser, shall deliver an
opinion to the effect that:
(i) the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an
association or a publicly traded partnership taxable as a corporation;
and
(ii) for United States federal income tax
purposes, the Junior Subordinated Notes will constitute indebtedness of
the Company.
In rendering such opinions, such counsel may (A) state that its opinion
is limited to the federal laws of the United States and (B) rely as to matters
of fact, to the extent deemed proper, on certificates of responsible officers of
the Company and public officials.
B-1
ANNEX C
Pursuant to Section 3(e) of the Purchase Agreement, Xxxxxxxx,
Xxxxxx & Finger, P.A., special Delaware counsel for the Purchaser and the
Delaware Trustee, shall deliver an opinion to the effect that:
(i) the Trust has been duly created and is validly
existing in good standing as a statutory trust under the Delaware
Statutory Trust Act, and all filings required under the laws of the
State of Delaware with respect to the creation and valid existence of
the Trust as a statutory trust have been made;
(ii) under the Delaware Statutory Trust Act and the Trust
Agreement, the Trust has the trust power and authority (A) to own
property and conduct its business, all as described in the Trust
Agreement, (B) to execute and deliver, and to perform its obligations
under, each of the Purchase Agreement, the Common Securities
Subscription Agreement, the Junior Subordinated Note Purchase Agreement
and the Preferred Securities and the Common Securities and (C) to
purchase and hold the Junior Subordinated Notes;
(iii) under the Delaware Statutory Trust Act, the
certificate attached to the Trust Agreement as Exhibit C is an
appropriate form of certificate to evidence ownership of the Preferred
Securities; the Preferred Securities have been duly authorized by the
Trust Agreement and, when issued and delivered against payment of the
consideration as set forth in the Purchase Agreement, the Preferred
Securities will be validly issued and (subject to the qualifications
set forth in this paragraph) fully paid and nonassessable and will
represent undivided beneficial interests in the assets of the Trust;
the holders of the Preferred Securities will be entitled to the
benefits of the Trust Agreement and, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware; and such counsel may
note that the holders of the Preferred Securities may be obligated,
pursuant to the Trust Agreement, to (A) provide indemnity and/or
security in connection with and pay taxes or governmental charges
arising from transfers or exchanges of Preferred Securities
certificates and the issuance of replacement Preferred Securities
certificates and (B) provide security or indemnity in connection with
requests of or directions to the Property Trustee to exercise its
rights and remedies under the Trust Agreement;
(iv) the Common Securities have been duly authorized by
the Trust Agreement and, when issued and delivered by the Trust to the
Company against payment therefor as described in the Trust Agreement
and the Common Securities Subscription Agreement, will be validly
issued and fully paid and will represent undivided beneficial interests
in the assets of the Trust entitled to the benefits of the Trust
Agreement;
(v) under the Delaware Statutory Trust Act and the Trust
Agreement, the issuance of the Preferred Securities and the Common
Securities is not subject to preemptive or other similar rights;
C-1
(vi) under the Delaware Statutory Trust Act and the Trust
Agreement, the execution and delivery by the Trust of the Purchase
Agreement, the Common Securities Subscription Agreement and the Junior
Subordinated Note Purchase Agreement, and the performance by the Trust
of its obligations thereunder, have been duly authorized by all
necessary trust action on the part of the Trust;
(vii) the Trust Agreement constitutes a legal, valid and
binding obligation of the Company and the Trustees, and is enforceable
against the Company and the Trustees, in accordance with its terms
subject, as to enforcement, to the effect upon the Trust Agreement of
(i) bankruptcy, insolvency, moratorium, receivership, reorganization,
liquidation, fraudulent conveyance or transfer and other similar laws
relating to or affecting the rights and remedies of creditors
generally, (ii) principles of equity, including applicable law relating
to fiduciary duties (regardless of whether considered and applied in a
proceeding in equity or at law), and (iii) the effect of applicable
public policy on the enforceability of provisions relating to
indemnification or contribution;
(viii) the issuance and sale by the Trust of the Preferred
Securities and the Common Securities, the purchase by the Trust of the
Junior Subordinated Notes, the execution, delivery and performance by
the Trust of the Purchase Agreement, the Common Securities Subscription
Agreement and the Junior Subordinated Note Purchase Agreement, the
consummation by the Trust of the transactions contemplated by the
Purchase Agreement and compliance by the Trust with its obligations
thereunder do not violate (i) any of the provisions of the Certificate
of Trust or the Amended and Restated Trust Agreement or (ii) any
applicable Delaware law, rule or regulation;
(ix) no filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any Delaware
court or Delaware governmental authority or Delaware agency is
necessary or required solely in connection with the issuance and sale
by the Trust of the Common Securities or the Preferred Securities, the
purchase by the Trust of the Junior Subordinated Notes, the execution,
delivery and performance by the Trust of the Purchase Agreement, the
Common Securities Subscription Agreement and the Junior Subordinated
Note Purchase Agreement, the consummation by the Trust of the
transactions contemplated by the Purchase Agreement and compliance by
the Trust with its obligations thereunder; and
(x) the holders of the Preferred Securities (other than
those holders who reside or are domiciled in the State of Delaware)
will have no liability for income taxes imposed by the State of
Delaware solely as a result of their participation in the Trust and the
Trust will not be liable for any income tax imposed by the State of
Delaware.
In rendering such opinions, such counsel may (A) state that its opinion
is limited to the laws of the State of Delaware and (B) rely as to matters of
fact, to the extent deemed proper, on certificates of responsible officers of
the Company and public officials.
C-2
ANNEX D
Pursuant to Section 3(f) of the Purchase Agreement, Xxxxx Liddell &
Xxxx LLP, special counsel for the Guarantee Trustee, the Property Trustee and
the Indenture Trustee, shall deliver an opinion to the effect that:
(i) JPMorgan Chase Bank is a New York banking
corporation with trust powers duly organized and validly existing in
good standing under the laws of the State of New York with all
necessary corporate power and authority to execute, deliver and perform
its obligations under the terms of the Guarantee Agreement, the Trust
Agreement and the Indenture;
(ii) the execution, delivery and performance by
JPMorgan Chase Bank of the Guarantee Agreement, the Trust Agreement and
the Indenture have been duly authorized by all necessary corporate
action on the part of JPMorgan Chase Bank, each of the Guarantee
Agreement, the Trust Agreement and the Indenture has been duly executed
and delivered by JPMorgan Chase Bank, and each of the Guarantee
Agreement and the Indenture constitutes the legal, valid and binding
obligation of JPMorgan Chase Bank enforceable against JPMorgan Chase
Bank in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and
to general principles of equity;
(iii) the execution, delivery and performance of
the Guarantee Agreement, the Trust Agreement and the Indenture by
JPMorgan Chase Bank do not conflict with or constitute a breach of (A)
the restated organization certificate or by-laws of JPMorgan Chase Bank
or (B) any law or regulation of the United States of America or the
State of New York governing the banking or trust powers of JPMorgan
Chase Bank;
(iv) no consent, approval or authorization of, or
registration with or notice to, any governmental authority or agency of
the United States of America governing the banking or trust powers of
JPMorgan Chase Bank is required for the execution, delivery or
performance by it of the Guarantee Agreement, the Trust Agreement or
the Indenture;
(v) the Junior Subordinated Notes have been duly
authenticated and delivered by JPMorgan Chase Bank; and
(vi) The Preferred Securities have been duly
authenticated and delivered by JPMorgan Chase Bank.
In rendering such opinions, such counsel may (A) state that its opinion
is limited to the laws of the State of New York and the federal laws of the
United States and (B) rely as to matters of fact, to the extent deemed proper,
on certificates of responsible officers of JPMorgan Chase Bank, the Company and
public officials.
D-1
ANNEX E
Pursuant to Section 3(g) of the Purchase Agreement, Xxxxxxxx,
Xxxxxx & Finger, P.A., counsel for the Purchaser and the Delaware Trustee, shall
deliver an opinion to the effect that:
(i) Chase Manhattan Bank USA, National
Association is duly formed and validly existing as a national
banking association under the federal laws of the United
States of America with trust powers and with its principal
place of business in the State of Delaware;
(ii) Chase Manhattan Bank USA, National
Association has the corporate power and authority to execute,
deliver and perform its obligations under, and has taken all
necessary corporate action to authorize the execution,
delivery and performance of, the Trust Agreement and to
consummate the transactions contemplated thereby;
(iii) The Trust Agreement has been duly
authorized, executed and delivered by Chase Manhattan Bank
USA, National Association and constitutes a legal, valid and
binding obligation of Chase Manhattan Bank USA, National
Association, and is enforceable against Chase Manhattan Bank
USA, National Association, in accordance with its terms
subject as to enforcement, to the effect upon the Trust
Agreement of (i) applicable bankruptcy, insolvency,
reorganization, moratorium, receivership, fraudulent
conveyance or transfer and similar laws relating to or
affecting the rights and remedies of creditors generally, (ii)
principles of equity, including applicable law relating to
fiduciary duties (regardless of whether considered and applied
in a proceeding in equity or at law), and (iii) the effect of
applicable public policy on the enforceability of provisions
relating to indemnification or contribution;
(iv) The execution, delivery and performance by
Chase Manhattan Bank USA, National Association of the Trust
Agreement do not conflict with or result in a violation of (A)
articles of association or by-laws of Chase Manhattan Bank
USA, National Association or (B) any law or regulation of the
State of Delaware or the United States of America governing
the banking or trust powers of Chase Manhattan Bank USA,
National Association or, to our knowledge, without independent
investigation, of any indenture, mortgage, bank credit
agreement, note or bond purchase agreement, long-term lease,
license or other agreement or instrument to which Chase
Manhattan Bank USA, National Association is a party or by
which it is bound or, to our knowledge, without independent
investigation, of any judgment or order applicable to Chase
Manhattan Bank USA, National Association; and
(v) No approval, authorization or other action
by, or filing with, any governmental authority of the State of
Delaware or the United States of America governing the banking
and trust powers of Chase Manhattan Bank USA, National
E-1
Association is required in connection with the execution and
delivery by Chase Manhattan Bank USA, National Association of
the Trust Agreement or the performance by Chase Manhattan Bank
USA, National Association of its obligations thereunder,
except for the filing of the Certificate of Trust with the
Secretary of State of the State of Delaware, which Certificate
of Trust has been filed with the Secretary of State of the
State of Delaware.
In rendering such opinions, such counsel may (A) state that its opinion
is limited to the laws of the State of Delaware and the federal laws of the
United States and (B) rely as to matters of fact, to the extent deemed proper,
on certificates of responsible officers of the Company and public officials.
E-2
ANNEX F
OFFICER'S FINANCIAL CERTIFICATE
The undersigned, the [Chairman/Vice Chairman/Chief Executive
Officer/President/ Vice President/Chief Financial Officer/Treasurer/Assistant
Treasurer], hereby certifies, pursuant to Section 6(h) of the Purchase
Agreement, dated as of September 30, 2003, among Meadowbrook Insurance Group,
Inc. (the "Company"), Meadowbrook Capital Trust I (the "Trust") and Dekania CDO
I, Ltd., that, as of [date], 20[__], the Company had the following ratios and
balances:
[For each Subsidiary Insurance Company (as defined below) provide:]
[INSURANCE COMPANY]
As of [Quarterly/Annual Financial Dates], 2003
NAIC Risk Based Capital Ratio (authorized control level) _____%
Total Policyholders' Surplus $_____
Consolidated Debt to Total Policyholders' Surplus _____%
Total Assets $_____
NAIC Class 1 & 2 Rated Investments to Total Fixed Income Investments _____%
NAIC Class 1 & 2 Rated Investments to Total Investments _____%
Return on Policyholders' Surplus _____%
[For Property & Casualty Companies also provide:]
[Expense Ratio] _____%
Loss and LAE Ratio _____%
Combined Ratio _____%
Net Premiums Written (annualized) to Policyholders' Surplus _____%]
* A table describing the quarterly report calculation procedures is provided on
page __
The following is a complete list as of [Quarterly Financial Date] of the
Company's companies which are authorized to write insurance business or
otherwise conduct insurance or reinsurance business (the "Subsidiary Insurance
Companies"):
[List of Subsidiary Insurance Companies]
F-1
ANNEX F
[FOR FISCAL YEAR END: Attached hereto are the audited consolidated financial
statements (including the balance sheet, income statement and statement of cash
flows, and notes thereto, together with the report of the independent
accountants thereon) of the Company and its consolidated subsidiaries for the
three years ended [date], 20__ and all required Statutory Financial Statements
(as defined in the Purchase Agreement) of the Company and its subsidiaries for
the year ended [date], 20__]
[FOR FISCAL QUARTER END: Attached hereto are the unaudited consolidated and
consolidating financial statements (including the balance sheet and income
statement) of the Company and its consolidated subsidiaries and all required
Statutory Financial Statements (as defined in the Purchase Agreement) of the
company and its subsidiaries for the year ended [date], 20__] for the fiscal
quarter ended [date], 20__.]
The financial statements fairly present in all material respects, in accordance
with U.S. generally accepted accounting principles ("GAAP"), the financial
position of the Company and its consolidated subsidiaries, and the results of
operations and changes in financial condition as of the date, and for the [___
quarter interim] [annual] period ended [date], 20__, and such financial
statements have been prepared in accordance with GAAP consistently applied
throughout the period involved (expect as otherwise noted therein).
The Statutory Financial Statements fairly present in all material respects in
accordance with Applicable Accounting Principles as defined in the Indenture)
the financial position of the subject insurance company and have been prepared
in accordance with Applicable Accounting Principles.
IN WITNESS WHEREOF, the undersigned has executed this Officer's
Financial Certificate as of this _____ day of _____________, 20__.
MEADOWBROOK INSURANCE GROUP, INC.
By:
------------------------------------------------
Name:
----------------------------------------------
Meadowbrook Insurance Group, Inc.
[Address]
[Address]
[Telephone Number]
F-2
ANNEX F
DEFINITIONS FOR QUARTERLY OFFICER'S FINANCIAL CERTIFICATE
ITEM DEFINITION/FORMULA
--------------------------------------------------------------------------------------------
NAIC RISK BASED CAPITAL RATIO-P&C (Total Adjusted Capital/Authorized Control
Level Risk-Based Capital)/2
NAIC RISK BASED CAPITAL RATIO-LIFE ((Total Adjusted Capital-Asset Valuation
Reserve)/Authorized Control Level Risk-Based
Capital)/2
TOTAL CAPITAL AND SURPLUS-LIFE Common Capital Stock + Preferred Capital
Stock + Aggregate Write-Ins for other than
special surplus funds + Surplus Notes +Gross
Paid-In and Contributed Surplus + Aggregate
Write-Ins for Special Surplus Funds +
Unassigned Funds (Surplus) - Treasury Stock
TOTAL CAPITAL AND SURPLUS-P&C Aggregate Write-Ins for Special Surplus
Funds + Common Capital Stock + Preferred
Capital Stock + Aggregate Write Ins for
other than special surplus funds + Surplus
Notes +Gross Paid-In and Contributed Surplus
+ Unassigned Funds (Surplus) - Treasury
Stock
TOTAL CLASS 1 & 2 RATED INVESTMENTS TO TOTAL (Total Class 1 + Total Class 2 Rated
FIXED INCOME INVESTMENTS Investments)/Total Fixed Income Investments
TOTAL CLASS 1 & 2 RATED INVESTMENTS TO TOTAL (Total Class 1 + Total Class 2 Rated
INVESTMENTS Investments)/Total Investments
TOTAL ASSETS Total Assets
RETURN ON POLICYHOLDERS' SURPLUS Net Income/Policyholders' Surplus
EXPENSE RATIO Other Underwriting Expenses Incurred/Net
premiums Earned
LOSS AND LAE RATIO (Losses Incurred + Loss Expenses
Incurred)/Net Premiums Earned
COMBINED RATIO Expense Ratio + Loss and LAE Ratio
NET PREMIUMS WRITTEN (ANNUALIZED) TO Net Premiums Written/Policyholders' Surplus
POLICYHOLDERS' SURPLUS
F-3
